Australia’s central bank holds rates steady, keeps hike on table
Markets had expected rates to remain steady after second-quarter inflation came in below forecasts and the housing market weakened more than policymakers had anticipated.
The Reserve Bank of Australia (RBA) maintained its cash rate at 4.35% during its August policy meeting, signaling the economy is slowing as expected. However, the bank warned it could raise rates again if necessary to control inflation, which is currently above its 2% to 3% target. Inflation is expected to ease back to the target band in the second half of next year, the RBA stated.
The bank has already raised rates by 75 basis points this year to reverse policy easing from 2025, as it struggles to contain inflationary pressures due to surging energy costs. While the Australian dollar remained flat, government bond yields reversed earlier gains to be flat as well.
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